INNOVATION

By Barry GrossBy Barry GrossAugust 12, 1985

Sens. Charles McC. Mathias Jr. (R-Md.) and Frank R. Lautenberg (D-N.J.) have marked the 195th birthday of the issuance of the first patent in the United States by introducing legislation to plug what they say is a significant loophole in the patent laws.

Two kinds of patents can be obtained in the United States. The more widely known kind is a product patent. But there also are process patents covering not the end product, but the process by which it is made.

Although current patent law "provides a remedy when unauthorized manufacture, use or sale of a patented invention occurs in the United States," it does not cover the importation of products made using processes patented in the United States, Mathias noted when introducing the bill on July 31.

Currently, holders of process patents can fight importation of such products only by convincing the International Trade Commission that they "destroy or substantially injure" the industry in which the inventor is involved, according to Mathias. He said that this "has required an inordinately high standard of proof" and that the commission cannot award damages, just issue an injunction.

Under the proposed legislation, the holder of a patent would inform an importer of suspicions that material being imported was made by his or her patented process.

If the importer did not seek a new source of supply, then he or she would have to convince the patent holder that the materials were not made by the patented process. Otherwise, the dispute would go to court.

The legislation is "an important step to protect U.S. companies from unfair competition by foreign manufacturers who are taking a free ride on U.S. research and development expenditures," according to Donald W. Banner, president of Intellectual Property Owners Inc., a D.C.-based nonprofit association representing people who own patents, trademarks and copyrights.

In 1983, sections of a more comprehensive patent bill introduced in the Senate covered process patents, according to Herbert Wamsley of the IPO. But these provisions raised questions from manufacturers of generic drugs and were dropped to permit passage of the bill last year.

The IPO and the Ad Hoc Committee to Improve the Patent Laws, a group of corporate patent lawyers, had pushed for patent law reform.

The cosponsors are predicting little opposition to this year's legislation. Lautenberg noted that his home state of New Jersey "is sometimes called the medicine chest of the nation" because it leads in the production of pharmaceuticals and that this year's bill should ease the generic-drug manufacturers' concerns because it grandfathers existing supply arrangements.

However, according a member of the staff of the Judiciary subcommittee on patents, copyrights and trademarks, which will receive the legislation, the generic-drug industry still is expected to oppose the measure.

"I think there's a very good chance" for passage, the spokesman said, citing Judiciary Committee and House passage of the earlier legislation last year. The spokesman also predicted Senate passage of the patent law amendment earlier next year.

Among imported products that illustrate the problem with process patents are amorphous metal alloys for which Allied Corp. holds the process patents, Wamsley said. The metals are used in electrical transformer cores. In action before the International Trade Commission, Allied charged 11 Japanese and European manufacturers with infringing on its patents.

The commission put the potential U.S. market value of the technology at issue at more than $1 billion a year. The commission did issue an exclusion order, but Wamsley said Allied indicated it would have been served better had the amendment been in effect.

Corning Glass Works has been unsuccessful so far before the ITC in stopping Sumitomo of Japan from importing optical waveguide fibers made by a process on which Corning holds the patent, Walmsley added. Corning began its action two years ago, and now is deciding whether to appeal an adverse ITC ruling. Corning told the agency it has spent more than $200 million over nearly 20 years on the research and development on optical waveguide technology.

By the way, the first patent was issued to Samuel Hopkins of Philadelphia for an improved process for making potash. The patent documents were signed by President George Washington, Secretary of State and Patents Commissioner Thomas Jefferson and Attorney General Edmund Randolph.